Russia will not supply oil with a price cap and will reduce production

Deputy Prime Minister of Russia Alexander Novak confirmed, in an interview on television network Russia 24, that Russia will prohibit supplying oil to countries that support an oil price cap. A presidential decree is forthcoming in the near future.

RIA Novosti quotes Novak as saying, “Under the terms of the decree, there is a ban on supplying oil and oil products to the countries and entities that demand compliance with the price cap introduced by the EU.”

Under these conditions, the Deputy Prime Minister said, Russia is prepared to reduce oil production “by around 500,000 to 700,000 barrels per day.” Novak said that the reduction would account for five to seven percent of Russia’s oil production. He noted that this is a small amount, but that nevertheless “there are risks.”

On December 5, an agreement took effect on a price cap for Russian oil shipped by sea to EU countries, Australia, and the G7 countries. The agreement allows for buying and transporting Russian oil only if its price is below $60 USD (with exceptions for Hungary, Bulgaria, Slovakia, Czechia, and Croatia).

The measure is supposed to reduce Russian revenues and, thus, weaken the Russian Federation’s ability to finance the war in Ukraine. Russian authorities have repeatedly said that they will not supply oil to countries that support the price cap.